2014 (12) TMI 506 - AT - Service Tax

Tribunal favors appellant in service tax classification dispute, overturning penalties, setting new precedent.

M/s. Jain Carrying Corporation Versus CCE, Jaipur

The Tribunal ruled in favor of the appellant in a case involving the classification of services provided under a contract and liability for service tax. ... Imposition of penalty - Scope of Cargo handling services - cleaning of the mining area - transportation of the gypsum from one place to railway station - activity of loading of gypsum into railway wagons/rakes through mechanical loaders - Held that:- First two services fall under different categories which were introduced subsequently and for which the appellant had started paying service tax from those dates, we find no reasons to hold that the said two services are part & parcel of the ‘cargo handling services’, which according to the Revenue falls under clause (c). - loading of the goods into racks or wagons through mechanical loaders does not fall under the category of ‘Cargo Handling Services’. For the said purpose, a reference may be made to the Rajasthan High Court in the case of S.B. Construction Co. Vs. Union of India - [2006 (8) TMI 28 - HIGH COURT OF JUDICATURE FOR RAJASTHAN (JODHPUR)]. However, as the appellant is not contesting the confirmation of demand under the said category on the ground that they have already deposited the same along with interest, we are not going into the details relatable to the said category. In any case, the issue being contentious and arguable and the demand having been raised by invoking the period of limitation, we deem it fit to set aside the penalties imposed upon the appellant. - Decided in favour of assessee. Issues:Interpretation of contract terms for service classification, liability for service tax on different services provided, imposition of penalties.Analysis:The judgment involves a dispute concerning the classification of services provided under a contract and the liability for service tax on these services. The appellant entered into a contract with M/s. Jain Carrying Corporation for various services, with specific details outlined in the contract. The services included sorting gypsum, loading into trucks and railway wagons, and completion upon loading into railway wagons. The appellant was issued a show cause notice proposing a demand for duty of Rs. 97,32,167, which was contested on grounds of both merits and limitation.Upon review, the Tribunal found that the services provided fell under different categories for service tax purposes. The service related to cleaning the mining area was categorized under site formation and clearance services, liable for service tax from a specific date. Transportation of gypsum to the railway station was considered under GTA services, with the appellant paying service tax accordingly. The loading of gypsum into railway wagons was the subject of contention, as the Revenue argued it fell under cargo handling services. However, the appellant had already paid service tax on this service and interest, without seeking a refund.The Tribunal disagreed with the Revenue's view that all services should be collectively treated as cargo handling services. It noted that the appellant had paid service tax on services (a) and (b) from their respective introduction dates. The Tribunal referenced decisions stating that loading goods through mechanical loaders did not constitute cargo handling services. As the appellant had already paid the demanded amount and interest, the Tribunal set aside the penalties imposed, considering the contentious nature of the issue and the invocation of the limitation period.In conclusion, the Tribunal set aside the impugned order except for the appropriation of service tax and interest already paid by the appellant. The penalties were overturned, and the appeal was disposed of accordingly.